Pagseguro, Nokia bring NFC payments in Brazil

By Raphael Michilis
20 April 2012
Brazil’s first commercial NFC mobile payment application will commence in May.

The electronic wallet has been developed by the Nokia Institute of Technology (INdT) in Brazil, and will be available on Nokia’s C7, N9 and 701 smartphones, the Finnish company told.

The solution will be offered in partnership with Pagseguro, a payments company that belongs to UOL, one of Brazil’s largest internet service providers. 

The app enables both retail payments - at bars, restaurants and stores – as well as proximity-based money transfer between users.

Instead of a POS, the Nokia-Pagseguro service requires both merchant and consumer to have a handset with the same application installed.

“The money will be withdrawn automatically from a credit card account, a PayPal account or from any of the other supported payment types”, said Nokia.

Mobile commerce specialist David Eads, founder of Mobile Strategy Partners LLC, is optimistic about the future of m-payments in Brazil and complimented the Nokia initiative in the country. 

“The PagSeguro pilot is interesting because it ties P2P technology to the leading payment products in Brazil. This enables broad payment acceptance from anyone with the application. Unlike other pilots, it also removes the complication of merchant POS hardware,” says Eads. 

“Closed networks like these with economic incentives have a history of succeeding in various emerging markets. For example, BlackBerry Instant Messenger (BBM) thrives in Venezuela because it avoids text messaging fees. Usage exploded because of the network effect once it reached critical mass,” he points out.

He says the economic boom that the Latin American markets are experiencing provides a rich ground for the mobile payments market to grow.

He estimates that there are between 30-40% of consumers across Latin America who are underserved by banks – and this is where mobile money initiatives can generate revenues by serving this segment, he says.

Security

Pagseguro says that rather than being completely automated, the Nokia app will always request the user to enter a passcode before each individual transaction.

“So, in case the handset is lost or stolen, nobody will be able to make payments in the user’s name,” the company explains on its website.

“The recipient types in the amount they are to collect and taps their phone against that of the sender. The amount is shown on the sender’s screen and the transaction can be completed, when both parties agree”, Nokia says.

According to Pagseguro, the extension of the service to other brands will depend on phone makers adapting their handsets to the NFC technology. Nokia sells three NFC enabled models in Brazil: N9, 701 and C7.

Regulation

“The Central Bank of Brazil (BCB) and the Brazilian Communications Ministry are discussing the regulatory aspects of financial inclusion and the security requirements mobile payments in the country,” Aldo Mendes, head of monetary policy for BCB said during Cards 2012 in Sao Paulo in mid-April.

“Mobile ppayment is a global trend with potential to bring sensible benefits to society, with reduction in costs and price, better convenience to users, and improvement of the service standards through the increase of competition.”

“The costs to bring people into the financial system through mobile payments are much lower than expanding the number of bank branches and other solutions that need physical investment in infrastructure, people and other technologies,” Mendes said.

An official outline for the Brazilian mobile payments regulation might be announced in about 90 days.

The Brazilian mobile payments regulation will also guarantee the universality of the service, imposing rules that prevent barriers to new entries, according to Mendes.

Banks and mobile operators will be free to enter the market. Business models will have to permit interoperability “to allow different platforms to communicate amongst each other”, so that different models do not represent a barrier to business,” explained Mendes.

He added that the coming regulation will also ensure:

• Adaptability, so that “new technologies allow the current payment modalities to co-exist with m-payments”;
  
• That contracts and technologies for m-payments in Latin America’s largest country will have the flexibility to allow users to migrate to different operators and handset makers;
  
• The prevention of money laundering and protection of consumers’ rights.